It’s been a while since we’ve updated market conditions by taking a hard look at the numbers. So, in this week’s column, let’s see how Anne Arundel County stacks up with the statistics.
Also, most people are curious as to how our current real estate market compares to the heady days of 2005, 2006 and 2007. As a result, we’ve looked all the way back to 2000. That provides a good perspective on the whole roller coaster ride in real estate.
With respect to what numbers are best to analyze, we’ve chosen the four most basic measures – Median Sales Prices, Days on the Market, Number of Homes Sold and the Number of Homes Available for Sale.
Median sales price
When it comes to real estate, the first thing everyone wants to know is what’s going on with prices. In Anne Arundel County, like many places that surround Washington, price appreciation from 2000 to the peak in 2007 was drastic.
In September 2000, the median sales price was $154,900. The highest monthly price was recorded in July 2007, when it reached $362,403. The current level for median prices is $290,000.
Although there have been fluctuations, median prices have generally remained in a range of $275,000 to $300,000 for the last three years. Recently, we seem to see prices on the rise, but higher numbers of distressed sales, such as foreclosures or short sales, may be holding median prices down, since many of these sales are in the lower price ranges.
Days on the market
Just how long it takes to sell a house gives us a pretty good idea of whether we’re in a strong, vibrant market, or one that’s just limping along. Furthermore, days on the market (DOM) can help us identify if it’s a buyer’s market or a seller’s market.
In August 2005, we hit the low point for DOM at 31. Conversely, by February 2009, it took more than five times as long to sell a house, and DOM was at a high of 158 days. Taking just a month to sell a house clearly isn’t normal; that’s the sign of a red hot seller’s market. And although five months is a long time, that’s actually a whole lot closer to normal.
Right now, we’re at about 100 days. Taking three to four months on average to sell a house is a pretty reasonable time frame. This would also indicate that we’re finding some equilibrium in the balance between buyers and sellers.
Number of homes sold
Typically, there should be a fairly slow and steady growth in the number of homes sold.
For the most part, this metric should track population growth. However, there could be other factors, such as business/government demands (or the lack thereof) for employees and geographic migration due to retirement trends.
During the housing bubble, another dynamic took hold and was primarily responsible for an increase in the number of homes sold – that’s the big rise in overall home ownership rates.
With easy financing, many people who were renters suddenly began buying homes. By late 2009, we saw many of those folks make the round trip back to renting, and since then, we’ve returned to more normal levels of home ownership and the growth associated with population increases.
Homes available for sale
Like days on the market, the number of homes available for sale, and the trend for this measure, can help us determine if the real estate market is headed for better times or worse.
In Anne Arundel County, the number of homes sold each month remained unusually flat during the four years from 2001 through 2004. Then, in a space of just two years, the number of homes sold skyrocketed, tripling from 1,400 a month to around 4,200 a month by the end of 2006.
Apparently, there was a certain point when prices had risen so much that many home owners just couldn’t resist cashing in. The herding effect was then further intensified when even more began to worry that they might miss the gravy train. In the end, and as prices started to fall, we ended up with a glut of homes on the market.
But, we’ve been steadily chewing through that inventory, and the number of homes on the market in any given month is now around 2,600. In Anne Arundel County, we won’t return to the 1,400/month levels of 2001 to 2004, because of growth in the demand for housing specific to this area, but where we’ll settle out for a sustainable level of housing stock has yet to be determined.
The bottom line
So, when you take all these numbers into account, what’s the bottom line? In short, visibility for the road ahead remains murky.
The election might be over, but that just left us right where we started. The same crew is in control, and the problems that were put off while we voted are still waiting to be resolved.
Buying or selling a house is a big bet financially, and as with all large money moves, uncertainty can keep you on the sidelines. For real estate, we’re clearly not going down anymore, but with respect to future gains, buyers and sellers are treading carefully.
Cautiously optimistic is where we see it today.
Bob and Donna McWilliams are practicing real estate agents in Maryland with more than 25 years of combined experience. Their email address is McWilliams@BobDonna.com.